South Korea's top economics official said yesterday that creditor banks are close to agreeing to bail out LG Card, which faces imminent default on maturing debt.
"LG Card has been a source of concern but creditors are now close to producing an agreement," Finance and Economy Minister Kim Jin-pyo told a local radio program.
The comment, however, failed to stop a slide in the value of LG Card, the country's largest card issuer, which has to repay 400 billion won (US$333 million) in debt maturing yesterday.
Financial officials called for an early agreement saying LG Card's insolvency may mean more than 26 trillion won in losses for South Korea's financial sector.
"Creditors are known to have reached an agreement on LG Card and they are now in the last minutes of negotiations," said Lee Jung-jae, chairman of the Financial Supervisory Commission.
Lee said the government will take steps for other credit card firms after normalizing LG Card.
Woori Bank and state-run Korea Development Bank (KDB) want creditors to put the ailing card unit of South Korea's second largest conglomerate, LG Group, under joint receivership overseen by 16 financial institutions.
However, Kookmin Bank, the country's largest lender, and several other commercial banks are still reluctant to accept a new rescue package, which includes a debt-for-equity swap worth 4 trillion won.
KDB agreed last week to lead a consortium comprising Kookmin, Woori and the National Agricultural Cooperatives Federation to put LG Card under joint management, with KDB holding a 19 percent stake in the company.
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